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Jobs report gains, LFPR loses

MarketWatch is reporting that the U.S. economy added 288,000 jobs in April. Numbers for February and March were both adjusted up based on new data. The unemployment rate is now 6.3% — lowest since September 2008.

I’ve written before that the Fed had turned reports like this into red flags for markets. Investors feared an end to stimulus more than they rejoiced at news of added jobs. But I expect things to be different this time around, as the Fed dropped their 6.5 percent unemployment threshold (which signaled the beginning of taper) in mid-March, choosing instead to use a more holistic and “qualitative” view of unemployment to gauge the health of the economy and signal an end to stimulus.

Today’s jobs report also revealed that the labor-force participation rate (LFPR) has dropped to a 35-year low. Business Insider’s Sam Ro writes, “Bottom line, the drop in unemployment is not just about job creation; it’s also about fewer people looking for work.”

I’m not saying the economy isn’t actually improving or that today’s good news is nothing to be exciting about. I just want to emphasize the importance of examining other associated metrics when the unemployment rate is published. After all, if the LFPR falls ceteris paribus, the unemployment rate will decrease despite a net decrease in the number of Americans who are employed.